All you need to see is one full tech cycle to know the company that describes itself as the, say, “Facebook but just for people who eat peanut butter,” isn’t going to make it. There are always hundreds of them — many more inane than that description, some less. Somehow they find cash. But almost none become big companies — fewer still even result in a decent acquisition.

Typically the horizontal play — Facebook, in this case — is simply good enough for dog lovers, or knitting enthusisasts, or teenagers, or senior citizens, or any other group to connect on.

Some may argue LinkedIn was a vertical — and that’s why many Valley people always argued LinkedIn was dying at the hands of Friendster, MySpace, or Facebook. But LinkedIn clearly built something very distinct in the end: A modern day recruiting platform, not simply a social network for professional relationships. More evidence of how distinct LinkedIn became from Facebook: One is a freemium business and one is ad-based. It essentially became its own horizontal. Meanwhile, the LinkedIn for just high-dollar executives or the LinkedIn for millennials never really became a thing.

This trend towards horizontals is such a truism in Silicon Valley that when Andreessen Horowitz launched, the firm considered an iron clad rule: No investments in verticals ever. As angel investors Marc Andreessen and Ben Horowitz had just watched this play out in 2004 with a raft of “vertical search engines” that raised billions of dollars. And aside from travel, none amounted to anything.

As Andreessen explains it, a vertical search engine for, say, the real estate industry would require deep industry knowledge about real estate. They’d rather back companies where the skills you are betting on is making the best software. And, clearly, Google had.

But early on, they softened their stance and have actually found themselves doing vertical investments throughout the firm’s history. This has more to do with timing than the two being wrong on their history. Suddenly it’s verticals — not the horizontals — where the innovation is happening. And no place is that more pronounced than in the sharing economy.

Airbnb is hands down the standout. No one else comes close — at least valuation-wise. Nearly every national sharing economy cover spends the bulk of its time talking about Airbnb, with some shout-outs here and there to everyone else. Meanwhile some of the more horizontal platforms — like Zaarly, Exec, and Taskrabbit — have gained footholds and marquee backers but haven’t grown nearly as fast. Depending on how you define the sharing economy, Uber is probably the second most successful entrant. Again, another vertical.

To those who study — or profit from — how companies form, this is a pretty staggering change. And just when we thought we’d seen this movie enough times that we knew how giant consumer Web companies were built.

There are two possibilities at play here. The first is that Airbnb and Uber are indeed following the Facebook playbook, and we’re just looking at these companies early in their trajectories. The second is that something has just fundamentally changed in the Web, as it’s gone global and mobile, and has collided more with the real world.

Per the first theory, one of the most remarkable things about Facebook was its controlled pacing. It started out as merely a social network for Harvard, then other colleges, then other affinity groups, and then eventually 1 billion people on the planet.

It’s possible that Airbnb and Uber are starting life as verticals but will grow into horizontals that dominate many corners of the peer-to-peer economy. Uber is the more aggressive of the two here. More than a year ago, at an industry event, I watched the founder of Postmates — a delivery company in the sharing economy — walk up to Uber’s Travis Kalanick to introduce himself and say what a fan he was. Kalanick, displaying his usual charm, said, “See you in the trenches” and turned and walked off.

At the time no one thought of them as competitors. But since then, we’ve seen Uber play around with leveraging its logistics network to route things, like Valentine’s Day bears, BBQ, and Mariachi bands, around the city. “At some point, Uber may have the opportunity to become a platform,” says Uber backer Shervin Pishevar. “But very few will be able to make that transition. Those experiments are happening now.”

He even sees Uber’s two-way rating system for drivers and passengers potentially evolving into a “credit report for people” that could be applied more broadly across the Internet. (Yes, in case you didn’t know, those drivers are rating you too. You might consider being nicer.)

And at our PandoMonthly with Airbnb’s Brian Chesky in January, he spoke of how he’d like to see Airbnb expand. He talked about his company’s unconventional approach to story boarding out the Airbnb experience. He said in the future, the company’s real edge over hotels would be delivering and expanding the hospitality experience in ways a hotel couldn’t.

For instance, if you love lemon squares, that’s in your profile, and Airbnb can connect a local host with a local baker who can make them fresh and have them sitting on the kitchen table when you arrive. That sounds an awful lot like a side-step into Zaarly territory. “This is a question we ponder all the time,” says Sequoia Capital’s Greg McAdoo, which backed Airbnb. “Is there going to be a reason why there are multiple category winners or will it be more like eBay? There aren’t going to be 150 companies in this space, but maybe two or three or four. In our experience it’s almost always the market forces that determine that. If the market speaks up that it wants one predominant marketplace, it’s up to Airbnb to fight to be that marketplace. If it becomes ‘winner take most,’ we like where we are with Airbnb.”

You can see some of the weaker competing verticals disappearing quickly. For instance, I see no reason for an Airbnb for boats to exist. Renting a boat is a far less common use case than a car or house and ultimately pretty similar to renting a vacation home.

But several of the people we’ve spoken to in the last few weeks insist that there is something different going on here. After all, Uber’s land grab is still limited to logistics; Airbnb’s is still limited to expanding the travel experience. They may stretch their verticals, but it’s unlikely they grow into true horizontal plays, say several investors in both companies.

So what is different this time?

Andreessen, for one, cites a few things. The first is that the end markets are just so much bigger than the early days of the Internet. You no longer have to be a big, wide horizontal to build a big business. Many verticals are bigger now than the entire Internet was in the late 1990s. That gives companies the freedom to deeply tailor the user experience to a more concentrated use case. And as the novelty of the the Web has worn off, consumers are increasingly demanding drop dead easy and beautiful user experiences. “A lot of the deep innovation is happening in the entire front to back end of the experience,” he says.

Any of the ride-sharing or delivery services will tell you their consumer facing apps could be designed in a week. It’s all the math and predictive algorithms on the back end that are the hard part. In the case of Airbnb, the idea requires sophisticated trust and safety systems to overcome the obvious obstacles that made everyone not want to fund it in the first place. Vertical specific regulations are a whole additional expertise that these companies have to navigate.

The trend is more pronounced the more mobile-centric a company is. On mobile, simplicity is key. “I went more vertical pretty quickly because of the simplicity of knowing exactly what the single function of an app is,” Pishevar says of his experience backing nearly a dozen companies in the sharing economy including Getaround, Taskrabbit, and Poshmark, along with Uber. “Single function apps that organize the physical world are where it’s at for me. That’s what people want: A single purpose company that proves a very powerful service people can trust.”

Add to that the fact that most of these companies — particularly the mobile-first ones — aren’t just operating in the virtual world. They are connecting software with the real world, and frequently doing so in dozens to hundreds of countries.

Nothing can complicate a simple user experience like the real world. (Just ask Square and Starbucks.)

Sarah Lacy is the founder and editor-in-chief of PandoDaily.
She is an award winning journalist and author of two critically acclaimed books, "Once You're Lucky, Twice You're Good: The Rebirth of Silicon Valley and the Rise of Web 2.0" (Gotham Books, May 2008) and "Brilliant, Crazy, Cocky: How the Top 1% of Entrepreneurs Profit from Global Chaos" (Wiley, February 2011).
She has been covering technology news for over 15 years, most recently as a senior editor for TechCrunch.

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